British Pound Loses Ground in European Trade as Investors Weigh Outlook for Future Policy

Published July 27th, 2009 - 01:17 GMT

GBP has been faring poorly in trade today, partly with Gilt investors perturbed by the BoE's indication last week that it may pause its bond purchase program. Last week's Q2 GDP also confirmed the biggest contraction in the U.K. economy in 60 years too, and although it hasn't been all doom and gloom regarding the U.K. economy, with retail sales doing well and house prices managing to stabilize in recent months, gilt markets were genuinely spooked by MPC member Sentance's hint about the possibility of quantitative easing. This sentiment has fed through to the FX market, while Deloitte also warned today of a slower-than-expected recovery for the British economy. Cable fell by about 50 pips after peaking above 1.6500 during the earlier bout of USD weakness. EUR-GBP, meanwhile, had logged a fresh high. GBP is also underperforming "risk currencies," such as the AUD.



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